Deals Drive Tokyo Stocks

123jump.com Staff
03 Oct, 2007
New York City

Nikkei 225 index in Tokyo traded higher led by surging brokerage and financial stocks. Citigroup agreed to acquire 32% of the remaining stocks of Nikko Cordial, the third largest brokerage firm in Japan for $4.6 billion or at 1,700 yen per share. On the news Nomura and Daiwa jumped nearly 5%. Stocks in the region traded mixed. Hong Kong fell 2.6% but India soared 3% to a new record.

[R]6:00AM New York, 7:00PM Tokyo – Nikko Cordial deal and foreign investment in real estate lifted Tokyo stocks nearly 1%. Domestic sale in the U.S. of Japanese makers rose in a weak market.[/R]

In Tokyo trading Nikkei 225 rose 0.9% or 153.11 to 17,199.89. Of the Nikkei 225 stocks 178 gained, 45 declined and 2 traded unchanged. Nikko Cordial Corp led gainers jumping 14% after Citigroup announced its intention to buy out the remaining 32% shareholders through a share swap. Brokerage stocks jumped on the news Daiwa surged 5.8% and Nomura added 4%.

Citigroup says it will be listing its shares ahead of the deal in Japan to wholly acquire Nikko Cordial Corp for 530 billion yen and then delist Nikko Cordial in January of the next year. Citigroup is offering 1,700 yen per share of the third largest brokerage firm in Japan, a premium of 16% from the previous day of closing. Citigroup acquired nearly two thirds of shares in the brokerage company by June of this year.

The recent change in the law allows foreign companies to make a purchase of Japanese companies using stocks of foreign companies. Citigroup will have additional branch network of 100 offices. Japanese households have $13 trillion in assets; however most of these are tied in real estate, life insurance policies, and bank deposits.

Goldman Sachs says it will be investing 200 billion yen in property acquisitions in Tokyo, Osaka and Nagoya. Goldman Sachs has been active in the real estate market in Japan since 1991 and has been buying parking lots, commercial buildings, golf courses, and movie theaters.

Commercial land prices in Tokyo surged 24% and in Osaka increased 14% and Nagoya rose by 24% in the twelve months ending in June. The Ministry of Land, Infrastructure and Transport announced recently that commercial land prices rose 1% for the first time in 16 years. The Ministry also added that the commercial properties jumped 5.1% during the same period.

The yen traded firmer for the second day against the dollar at 115.79 from 115.74 yesterday.

Of the Nikkei 225 index stocks, Nikko Cordial Corp led gainers with a rise of 13.68%, followed by increases of 9.09% in IHI Corporation, 7.96% in Resona Holdings, 7.16% in Sumitomo Trust and Banking Company Limited and 6.48% in Credit Saison Co.

Realty stocks gained as well. Kajima Corp jumped 3.12%, Mitsubishi Estate Co. soared 2.68% and Kumagai Gumi added 1.71%.

Honda rose 0.26%, Nissan Motor added 1%, and Mazda jumped 4.52% correspondingly on sales increases to the U.S. market. Mazda led the domestic sales growth in the U.S. with a gain of 24% and sales at Honda jumped 9.4%.

Ajinomoto Company led the declining stocks with a fall of 4.36%, followed by losses of 2.96% in Meija Seika, 2.78% in Fuji Electric Holdings, 2.59% in Kikkoman Corporation and 2.52% in Matsushita Electric.

Fujitsu Limited is set to acquire Infinity Solutions Limited through Fujitsu New Zealand for 3 billion yen. The deal is set to be completed by October 16 and will increase sales of the New Zealand subsidiary to 10 billion yen in fiscal year to 2007.